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An Empirical Framework For Matching With Imperfect Competition

Author

Listed:
  • Mons Chan
  • Kory Kroft
  • Elena Mattana
  • Ismael Mourifié

Abstract

This paper builds, identifies and estimates a model of the labor market that features strategic interactions in wage setting and two-sided heterogeneity in order to shed light on the sources of wage inequality. We provide a tractable characterization of the model equilibrium and demonstrate its existence and uniqueness. This characterization of the equilibrium allows us to derive a rich set of comparative statics and to gauge the relative contributions of worker skill, preference for amenities and strategic interactions to equilibrium wage inequality. Using instrumental variables, we establish identification of labor demand and supply parameters and estimate them using matched employer-employee data from Denmark. Using our estimated structural model, we perform a series of counterfactual analyses in order to provide a quantitative evaluation of the main sources of wage inequality in Denmark.

Suggested Citation

  • Mons Chan & Kory Kroft & Elena Mattana & Ismael Mourifié, 2024. "An Empirical Framework For Matching With Imperfect Competition," NBER Working Papers 32493, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32493
    Note: IO LS
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    More about this item

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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